Streamline Your Transactions with ACH Validation

If you don’t think your business is threatened by payment fraud, you’re probably not paying attention. In a recent survey, a staggering 80% of respondents reported that their organizations experienced payment fraud activity. ACH validation isn’t simply some regulatory red tape. ACH stands for Automated Clearing House. It is the main financial system agencies use to complete an electronic funds transfer, or EFT. 

In this article, find out how ACH acts as a robust system of transaction validation that holds the potential to fight fraud, ensure accuracy, and reduce waste, especially when integrated with the Salesforce billing platform. 

Why Does ACH Matter?

ACH uses a process of validation to ensure account accuracy, fund availability, and fraud prevention. On a basic level, ACH validation facilitates electronic communication between the banks or businesses involved in a financial transaction. Through microtransactions, explained below, and real-time validation, ACH validation confirms the correct account and availability of funds, reducing the rate of returned transactions, which cost you time and money. 

The rules for ACH transfers are written and maintained by NACHA or the National Automated Clearing House Association, a private, non-profit organization composed of industry leaders. For instance, NACHA helps in the battle against fraud by setting strict rules governing data storage, requiring encryption so private info remains secure.

The ACH Validation Process

Here’s a simple, four-step explanation of the validation process using a hypothetical scenario involving direct deposit. Whether an ACH bank transfer or ACH business-to-business payments, the process is similar. 

1. Data Collection: To begin the process, the business or bank collects data concerning the account with which they hope to do business. This includes things like the account number, the bank’s routing number, and names associated with the account. 
2. Verify the Account: This is where the heavy lifting happens. In this step, businesses utilize the ACH to validate that the account exists, has the funds to cover the transaction, and belongs to the right person. The method of validation, discussed below, may differ, but each method aims to verify the account. For example, with the direct deposit employee, the account could be validated using microtransactions, ensuring you’re paying the right person. 
3. Record and Document: Once the account has been validated, record this in your records and document approval for the account. This will prevent you from having to repeat this step each time. 
4. Safe Storage: Finally, remember to securely store any data to prevent data breaches or security leaks. Sensitive data should be encrypted. Your new direct deposit employee will feel secure, knowing his or her private information is safe. 

The methods for account validation differ, so you’ll need to select the one that best fits your company’s needs:

• Micro-deposits: With micro-deposits, very small deposits of a few cents are made into the receiving account to verify the account is valid and the information is accurate. Micro-deposits are quite secure and accurate, but take a business day or two to complete. 
• Real-time Account Validation: On the other hand, instant account validation saves time by having the receiver log in to their bank or account through a third party. This has the advantage of being instantaneous and user-friendly. Even so, some users may not feel comfortable sharing their info with a third party.  
• Account and Routing Number Format Verification: This method checks to see if the bank’s routing number is real and active, while also verifying that the account number matches the format used by the receiving bank. This is helpful to catch data entry errors, where an account number is too long or too short. Unfortunately, this method doesn’t actually verify the owner of the account. Some online platforms use this method as a first draft of the transaction, verifying the account is valid and later establishing ownership. 

Integration With Salesforce and Chargent

Some companies leverage automation to make this quick and safe system even more efficient. ACH validation for Salesforce can be done using the Chargent app, which has a partnership with Lyon ACH Validation. Because validation is automated, this requires less user input, reducing the risk of manual errors or data entry mistakes. Thus, you can reduce ACH returns with Salesforce. These validation records are securely stored within Salesforce, encrypted, and safe from cybercriminals. 

Salesforce also offers users a helpful system to automate billing. Using Salesforce Billing, you can enable the autopay feature, which uses your established payment method to automatically pay invoices when they’re posted. This offers businesses an incredibly efficient method for managing transactions from banks in North America with relative ease.  

Benefits of ACH Validation

When you improve payment security with ACH validation, you are better equipped to prevent fraud, increase operational efficiency, and comply with relevant regulations. An ACH payment method prevents fraud by verifying the account with which you’re transacting, establishing that it’s real, has funds, and shows proper ownership. Likewise, the type of automation offered by Salesforce promises to increase the operational efficiency of your organization, streamlining your payment processes, which saves you time and money. Finally, utilizing ACH payment processing for small businesses means you have a head start in remaining compliant with local, state, and federal regulations. 

Imagine you are the bookkeeper for a small private school. You receive an email supposedly from a teacher, requesting to change the info for his direct deposit payment. You collect the data, but when you attempt to validate the account, you find a different owner. In this example, ACH validation protected your employee and organization from fraud.

Leverage Secure ACH Validation With Chargent

ACH validation is an indispensable weapon in the fight against fraud and waste. Verifying the account in question ensures you know who you’re doing business with. Coupling this with automation on a digital platform like Chargent featured by Salesforce gives you the best opportunity to eliminate inefficiencies and thwart would-be fraudsters. Even so, ACH validation is only one component in structuring how your business receives payment. If you want to learn how to save more money on payment processing, check out this helpful Payments Checklist by Salesforce.